Bitcoin Revolution Scam
Tim Draper is headmaster in Draper University and a partner of Draper Associates.
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When I first saw the prospect of a digital currency it was not 10 years ago, but more like 15. I have been through some large up and downs in bitcoin. But I am more certain than ever that the bitcoin revolution is coming.
I heard from a wealthy industrialist that people paid money for items to use in massively multiplayer video games. The match was”Lineage,” that was taking Seoul by storm.
He brought in his company Coinlab and Peter Vincennes to pitch us. Bitcoin was a new money that may be used to store value and pay for anything, not only for progress in a game.
I quickly absorbed bitcoin’s basics: wallets miners and such. The amount of bitcoins available to be mined over time meant that a bitcoin’s purchase price would increase in value as fewer bitcoins were mined and usage increased. In fact, since spread and their use increased, it was likely that the money would become valuable.
Coinlab would become miner and a bitcoin-focused innovator. We made a little investment. My son Adam began an accelerator named Boost VC, dedicated to bitcoin (and blockchain) companies.
Around that time, I asked Peter if I could buy $250,000 worth of bitcoin. He bought some for me at about $6 each and saved them in Mt. Gox, the largest bitcoin exchange at the moment. He said he’d also buy a mining processor from Butterfly Labs to get us even cheaper bitcoin. These efforts Both went south.
The mining chip was delayed. Rather than shipping it to Peter as ordered, Butterfly Labs used the processor for themselves to mine bitcoins.
But something significant happened with the collapse of Mt. Gox. Bitcoin’s purchase price dropped about 20 percent, and the money continued to be traded on exchanges. I curious and was flabbergasted.
I realized that the requirement for this new currency was so powerful that even a huge theft would not keep bitcoin from developing a new way for us to innovate, save and transfer money. Since the financial crisis, people were losing their confidence in authorities or”fiat” currencies. I went on to back a number of the Boost VC bitcoin providers, and as I discovered more and more uses, an opportunity arose.
And something happened that gave me another shot at getting involved in the bitcoin prospect. The U.S. Marshall’s office seized the bitcoins possessed by the Silk Road, an online drug marketplace, and nearly 30,000 bitcoins were put up for auction. I looked to rebuy the bitcoins I lost.
The market price was $618 per bitcoin. In the last minute, I decided to bid higher than market price. I bid $632 and won the bitcoins all!
For paying a higher price than anyone else was willing to pay Following the buyer’s remorse, I thought about how I could best drive a use for these bitcoins with a tainted past. I decided that I would use them to encourage the proliferation of bitcoin where people did not have confidence in their currencies.
Many people in such countries are not”bankable.” Banks lose money on people who do not have enough to create of the paperwork worthwhile. Banking regulations set up to protect the little guy have actually kept the little man from participating in the market — almost guaranteeing that he’ll remain”the little man.” There are countless”unbanked.”
Avish Bhama named Mirror helped me figure out a plan to spread the money to emerging country markets. The idea was to allow people from developing nations the ability to invest in anything (even to go short against their own money ) by using bitcoin as the”rails,” the conduit for the trades.
Mirror later shifted its business model, but companies I endorsed BitPesa in Africa, Bitpagos in Latin America, and CoinHako in Southeast Asia — are creating the emerging world their market.
I remain impressed by the possibilities for blockchain and bitcoin.
But there are quite a few other uses.
A bitcoin wallet can be used as an escrow for a contract in transition, as a redistribution of an estate or as a transport agent to distribute shares, dividends or payments of stock. Corporations may use the blockchain pay their dividends to shareholders to pay their wages and benefits to employees, and pay their interest and principal payments to noteholders, all with automated accounting and accuracy.
The blockchain can manage transfers and will handle trades without needing debit or credit cards. Insurance companies can use it to manage their claims and automate collections. Real estate escrows and names can be done quickly and easily between seller and purchaser. Food and drugs can be authenticated by blockchain to ensure their origins.
And the U.S. Government can manage social security, welfare, Medicare, worker’s comp, disability and their data verification of citizens and businesses with bitcoin and the blockchain, since blockchain is the perfect government employee.
It’s incorruptible honest, secure, and fair.
Change is coming
Industries will have to experience changes to adapt to the arrival of the new way of thinking. People will have to learn that the bank, being the trusted party for centuries will be replaced. Banking will be simpler, safer and easier than relying on people to perform the monotonous job .
It is interesting to note that countries recognizing they are in competition with one another, are attempting to make sure that they win the bitcoin economy. The smartest of them are either allowing bitcoin to flourish or recognize they need a light touch in regulating bitcoin to draw all the creativity, money.
The U.S. was wise to leave the net unregulated and free because all of the internet entrepreneurs generated startups domestically and the economy around the net blossomed.
There are a number of parallels between bitcoin and the net in 1994. In 1994, the net was for hobbyists and hackers. I remember when I used try to break into NORAD and the Internet would be to buy diamonds. There were very few applications. It took many years for the internet to become mainstream, but when it did, it changed industries.
The long-term vision for bitcoin is to give economic emancipation to the world. The possible if bitcoin is only limited by the imaginations of the entrepreneurs who operate to drive this digital economy. To monitor and keep it honest, I feel that users’ community will, obviating or possibly eclipsing the need for the governments to control the world.
I have been with bitcoin through the ups and downs, and I’m as certain as ever that the bitcoin revolution is coming.
It’s here to bank the unbanked, to democratize opportunity and to reevaluate governance. I expect that it will change everything in the banks and the financial system to democracy, even the authorities.